It was near midnight on Jan. 19, 2013 when Steven Hofer was driving his truck on the frozen plains of northwestern North Dakota. A car driven by a drunk driver crossed the center line, hitting Hofer head on. He suffered severe injuries in the collision.

The motorist who hit him didn’t have insurance. But Hofer, a Sioux Falls man who owned a trucking business, had purchased a $1 million policy that protected him from uninsured motorists.

Or so he thought.

Today, Hofer has a pending lawsuit in federal court against the insurer, Progressive Northern Insurance Co. At first blush, it’s a case like many others: Someone who thought they were insured suing an insurance company for bad faith and breach of contract, claims that are common in federal court.

But the Hofer case could have larger ramifications. In April, Judge Karen Schreier sanctioned the company for neglecting to turn over hundreds of Independent Medical Examinations, or IMEs, conducted by three Minnesota doctors on behalf of Progressive, including a doctor who examined Hofer.

The sanctions were unusual. But even more notable, say lawyers who handle bad faith insurance cases, is the fact that Hofer’s legal team now has access to more than 500 IMEs that were conducted by doctors chosen by Progressive to evaluate injuries. Insurance companies use the IMEs to determine whether they will pay benefits to people hurt in car crashes, accidents and worker compensation cases.

In Hofer’s case, Progressive withheld benefits after Dr. Nolan Segal wrote an IME that said Hofer’s spine injuries weren’t caused by the accident. Segal’s reports contradicted Hofer’s own medical doctors and an MRI taken after the accident, but Progressive relied on Segal. Hofer’s lawsuit contends that Progressive “knew or should have known that Dr. Segal has a long history of bias in favor of insurance companies.”

“Dr. Nolan,” the complaint says, “concluded that plaintiff had suffered no injury whatsoever in the head-on collision that had occurred at a speed of 55 mph.”

Shining a light

The sheer number of IMEs that Progressive turned over could open a window into insurance companies’ use of doctors. The hundreds of IMEs will show how often the doctors gave opinions that were favorable to the insurance company, allowing the company to terminate or deny benefits.

Initially, Progressive turned over just 11 IMEs of exams done on South Dakota residents, despite a ruling from Schreier that it turn over all the IMEs conducted by Segal and the two other doctors on anyone in the nation.

The 11 that Progressive turned over all suggested that the accident victims were either not injured or no longer required medical treatment, according to court filings in the case. Those findings would have given Progressive grounds to deny benefits.

Scott Abdallah, an attorney representing Hofer, said he could not talk about the case because it is ongoing. But he said the use of so-called independent medical doctors to deny insurance claims have cost hundreds of South Dakotans benefits they were entitled to receive, and the problem is getting worse.

“Most companies want an opinion that is predictable so they can promptly deny a claim and increase their profits,” he said. “In my opinion, I think this problem is becoming an epidemic in the insurance industry.”

The Insurance Information Institute, an industry group, did not respond to an interview request. But insurance companies have argued that IMEs are essential to weeding out fraudulent claims by people faking injuries, and there have been numerous examples of people committing insurance fraud.

Another industry group, the Coalition Against Insurance Fraud, estimates that the industry loses billions of dollars a year in bogus worker comp and auto accident claims. In 2012, injury claims in auto accidents grew 4 percent.

Seamus Culhane, a Watertown lawyer who tries cases against insurance companies, said a rule designed to promote fairness in the legal system allows both sides in a lawsuit to examine an injured person.

Typically an injured person relies on the opinions of treating doctors, while insurance companies are using “compulsory medical exams” to acquire a predictable medical opinion that can be used to deny a claim.

“Instead of using examinations to discover evidence of the injuries involved, some companies are relying on predictably favorable doctors to create evidence supporting the insurance company’s position,” Culhane said.

Attorneys across the state are watching the Hofer case, he said, because typically they only have access to the IME of their client. The hundreds of exams turned over could provide a “big picture” perspective on whether insurance companies are relying on biased doctors to deny claims.

Questions of bias

In South Dakota, a handful of mainly out-of-state doctors come up frequently in bad-faith cases against insurance companies. Last year, the South Dakota Supreme Court ruled against Dakota Truck Underwriters and Risk Administration Services in a worker compensation case brought by James Mordhorst.

Mordhorst worked as a furniture deliveryman when a 275-pound couch fell off the end of a truck, striking him in the head and shoulders and rendering him unconscious. A subsequent MRI revealed a herniated disk and Mordhorst, who was 22 when the 2011 accident occurred, suffered from chronic severe back pain.

In 2012, the insurance companies asked Segal – the same doctor in the Hofer case – to perform an IME on Mordhorst. Segal concluded that Mordhorst’s injuries should have resolved 18 days after the accident. Armed with Segal’s report – which contradicted his treating physicians – the insurance company ceased paying benefits to Mordhorst.

In his opinion, Chief Justice David Gilbertson repeatedly described Segal’s IME as “biased.”

“The Segal report was also transparently biased because it ignored Plaintiff's pain complaints which were consistently present ... and in the same location of the thoracic disk herniation and documented in Plaintiff's medical records,” Gilbertson wrote.

Mike Abourezk, who represents Mordhorst, said the doctors who perform IMEs typically use language to trick people into thinking they don’t have a claim. Sometimes a doctor will say a person has reached maximum medical treatment for an injury, but the term ignores the fact that even if an injury can’t be treated, there is still often pain that needs to be treated.

“It’s like saying a diabetic has reached maximum medical treatment and they don’t need any insulin,” Abourezk said.

Questions pile up

Segal, who has an office in St. Louis Park, Minn., did not return a message. A receptionist at his office referred questions to ExamWorks, a national company that contracts with Segal and doctors around the country to perform IMEs. A spokeswoman with ExamWorks said the company does not talk with the media.

In a 2013 deposition, Segal admitted that he hadn’t updated his board certification in orthopedics since 1982. He said he performed about 25 IMEs a month, and when asked if he’d made millions of dollars doing them, he didn’t dispute it.

A separate IME obtained by Argus Leader Media of a woman whose car was hit from behind by another motorist in 2012 contained several errors. Done by Dr. Thomas Jetzer of Edina, Minn., the report accidentally referred to the woman by another patient’s name. It said the woman suffered from a “lumbar strain of the cervical spine,” a condition that doesn’t exist. And it offered contradictory opinions about her injury.

But most glaringly, the report, which went to the insurance company, said: “OK to add or feel free to reword,” an invitation to the company to alter the report.

The company used the report to deny benefits to the injured woman. Jetzer did not return a message.

Abdallah said the problem needs to be fixed. Insurance companies should be monitoring the doctors they use for bias, and they shouldn’t be shopping for out-of-state doctors who make a living writing IMEs and not seeing patients.